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Sun and IBM - What price Bigger Indigo?

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Comment Innovation loves a crisis, Sun boss Jonathan Schwartz likes to say. But perhaps not so much as your competitors love your particular crisis. Witness the way IBM has quietly but gleefully watched Sun's power and fortunes wane in the aftermath of the dot.com bust.

Every one of those wisecracks by Scott McNealy and Ed Zander a decade ago about "the world versus IBM Global Services" may come back to haunt Sun's founders and employees if the rumored takeover deal of Sun by Big Blue does indeed come to pass.

As of the market close on Wednesday, no deal had been announced. But we hadn't seen a firm denial from Sun or IBM either. That, plus reports confirming the original report in the Wall Street Journal coming out of the Associated Press, Reuters, and the Financial Times, would seem to indicate that Sun and IBM are indeed talking about some sort of takeover deal. If a deal is in the works, the companies should make an announcement before the market opens on Thursday, and if the rumor is not true, then someone should go to jail for pumping up Sun's stock by 79 per cent to $8.89 per share.

That IBM would shell out nearly $8bn to buy Sun is stunning to people who have been in the computer business for a while. Not just because that is the largest acquisition that IBM will have ever done in its history, not just because Sun can be acquired for such a small amount of cash, but because it seems so unnatural.

Sun and IBM are allergic to each other. IBM is the button-down Puritan from the East coast (no matter how hard is has tried to loosen up, it is still as stiff as a new wingtip). Sun is the young, wisecracking hipster from the West coast (well, formerly wisecracking until it was crushed by the dot.com bust). If this were a Hollywood love story, there would have been a chance meeting and lots of high jinx, and then a romance would have ensued. But in real life, when you marry someone not suited to you, one of you ends up with the goldmine and the other one gets the shaft.

For amusement sake, let's assume the rumors are true and that Sun has shopped itself around to Hewlett-Packard (which apparently rebuffed Sun's advances) and to Fujitsu (which apparently can't come up with the cash). Maybe other companies have been approached by Sun for a potential acquisition too.

Let's even assume, for the sake of a good story, that the entry of Cisco Systems into the server racket on Monday provided the impetus to put some fire into Sun's eyes. Perhaps the rapidly decelerating server market, Sun's financial results for the quarter ending in March, and IBM's bragging that it is Mister Moneybags in 2009, despite the down economy, have compelled Sun to gussy itself up a bit and place a call to Armonk, New York.

Personally, I find this image repugnant in so many different ways.

I happen to think the systems market needs more, not fewer, vendors, and the market needs different kinds of boxes, both virtual and physical. But you would expect a systems editor to say that, now wouldn't you? And as for doing what is necessary, I also know what that is like too. I shut down a big chunk of my IT Jungle site and came to work at a competitor because I could not match the scale of The Register.

You fight as long as you can, but you have to take your opportunities when they present themselves. You have to deal with what is, not with what you wished, and you can't look back. Maybe Schwartz is having that kind of moment.

So how might Sun and IBM fit together? Well, first and foremost, IBM always thinks of recurring revenue streams and steady customer bases. Sun has never broken out its Solaris business (licenses plus support) as a separate line of business, but this is the jewel of the company, every bit as much as the z/OS and related middleware stack on IBM mainframes are for Big Blue.

It is basically free money, so long as customers can't easily move their applications. Sun's strong presence in the financial services and telecommunications industries is also something that IBM has craved. So that is worth something too, if those customers want to stick with IBM/Sun.

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